Asian stocks climb amid U.S. labor market softening signals

MUMBAI: Asian stocks rose on Wednesday, while the dollar was steady as a softening U.S. labour market firmed up bets of an interest rate cut in September from the Federal Reserve ahead of a crucial payrolls report this week.

Investor worries of a cooling U.S. economy, however, kept a lid on risk appetite, while the focus in Asia is on how Indian markets fare after stocks sank and the rupee slid on Tuesday following voting results that showed a slimmer-than-expected victory margin for Prime Minister Narendra Modi. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.24%, while the Nikkei fell 1% as the Japanese yen flirted with two-week highs.

China stocks were mixed, with the blue-chip CSI300 index little changed in early trading, while Hong Kong's Hang Seng index rose 1%. China's services activity in May accelerated at the quickest pace in 10 months while staffing levels expanded for the first time since January, a private sector survey showed, pointing to sustained recovery in the second quarter.

Data overnight showed U.S. job openings fell more than expected in April to the lowest level in more than three years, a sign that labour market conditions are softening. The data emboldened bets of rate cuts this year, with markets pricing in 45 basis points of easing. Traders are also pricing in a 65% chance of a rate cut in September, compared to 46% a week earlier, CME FedWatch tool showed.

"While this (job openings data) should have no bearing on Friday's payrolls, it does look to confirm that the U.S. labour market is softening," said ING economists. Benchmark 10-year note yields were at 4.3376% in Asian hours, after hitting an almost three-week low of 4.314 on Tuesday following the jobs data.

The dollar index, which measures the U.S. currency against six rivals, was steady at 104.14 in early trading, after touching a near two-month low of 103.99 on Tuesday. The dollar's relentless strength in the recent past will make way for minor weakness over the next 12 months, according to FX strategists in a Reuters poll, who generally agreed the dollar was overvalued.

"If inflation remains sticky, it might not prompt a rate hike, but it would force the market to re-price how much easing a patient Fed can deliver in 2024 with time running out," said Daragh Maher, head of FX strategy for the U.S. at HSBC. "Beyond inflation data, however, bad news on growth is likely to remain straightforwardly bad news for the dollar unless recession concerns intensify."

Dollar's weakness helped the yen strengthen to a more than two-week high of 154.55 per dollar on Tuesday. It was last at 155.48 on Wednesday morning. Meanwhile, futures pointed to a subdued open for India's Nifty 50 index after sliding nearly 6% on Tuesday, their worst session in four years, with foreign investors selling roughly $1.5 billion worth of shares.